Info

Operating cash flow Capital spending

-$450,000

$120,750

$120,750

$120,750

$120,750 165,000

Total cash flow

-$450,000

$120,750

$120,750

$120,750

$285,750

You can verify that the NPV at 17 percent is -$30,702, and the return on the new surveillance system is only about 13.96 percent. The project does not appear to be profitable.

Ross et al.: Fundamentals of Corporate Finance, Sixth Edition, Alternate Edition

IV. Capital Budgeting

10. Making Capital Investment Decisions

© The McGraw-Hill Companies, 2002

CHAPTER 10 Making Capital Investment Decisions

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